The Standard & Poor’s 500 Index in its statement has announced that J.C. Penney Co. (JCP), the retailer struggling to fare better in stock markets as the company has been unable to get sales in two decades, will be replaced in the Standard & Poor’s 500 Index by Allegion Plc., a company that makes residential and commercial door locks.
In the press release the Standard & Poor’s announced several changes that will be carried out by the end of the month. The release informs that S&P Dow Jones Indices Allegion Plc. will replace J. C. Penney Company Inc. in the S&P 500. Whereas J. C. Penney will replace Aeropostale Inc. in the S&P MidCap 400, Aeropostale will replace Corinthian Colleges Inc. in the S&P SmallCap 600 after the close of trading on Friday, November 29.
Currently, Allegion Plc. has a market capitalization of $4.2 billion. However, for JC Penney and Aeropostale have been faring worse in the current year. In fact, shares of both retailers have gone down remarkably as the two companies are facing trouble their losses have compounded over the years.
Whereas J.C. Penney is the bigger loser and has lost 56%, Aeropostale has lost close to 16% in its year-to-date loss. Nonetheless, both retailers have not been able to cope well with the promotional environment and their margins have gone to negative. In fact, Aeropostale shareholder Crescendo Partners urged the company to sell itself.
Crescendo Partners opined that selling Aeropostale will be better considering that the company still has a strong valuation before it is too late. Nonetheless, the latest decision on the part of Standard & Poor’s to downgrade the company will further complicate the issue and affect its valuation.
Investors believe that the S&P demotions of the two companies are more of a hit to their reputations than anything else. The indications came soon as shares of J.C. Penney were down just 1.35% in after-market activity on Friday afternoon. Similarly, Aeropostale shares were not doing better as they fell by 0.58%.
In its statement S&P said that J.C. Penney’s market value fell 37 percent this year to $2.7 billion which makes it more representative of the mid cap market. Reportedly, shares of J.C. Penney have fallen 55 percent this year.
However, Chief Executive Officer Mike Ullman, who returned as CEO in April to replace Ron Johnson, has raised about $4 billion to try to give the company enough cash to complete a turnaround.
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